2 To establish whether there was a legal contract between both parties, it must first be proven that the revocation letter sent to Donalds was made void. An essential element of revocation is communication to the offeree. Communication need not be made by the offeror, communication through a third party will suffice. This is supported by the judgement in Dickenson v Dodds1, which stated that implied revocation is possible even if the offeree hears of the revocation through a third party. In this scenario, Mac had instructed his assistant, Blur, to issue the letter of revocation. Donalds hears of this revocation through Blur, and the revocation can still be counted as valid.
3 However, this is revocation is made irrelevant as the revocation was not made known to Donalds before he accepted the offer. In the case of Byrne v Van Tienhovan2, it was held that an offer is only revocable if it is communicated to the offeree before the offeree’s acceptance takes effect. In this scenario, Donalds would only have received the revocation on 5 August, at 1.00 PM and thus, the revocation was only effective from then. By 5 August, the contract was already in existence.
4 The contract between Mac and Donalds exists in spite of the fact that Blur sent out the revocation via post instead of the fax machine. The letter of revocation was delivered late as a result of a technical problem in the post office. There seems to be valid ground to apply the postal acceptance rule, which states that acceptance may take place when the letter is posted, even if the letter goes astray and is lost, as evidenced in the case of Household Fire & Carriage Accident Insurance Co Ltd v Grant3. But the postal acceptance rule cannot be used in this instance as it was held in Henthorn v Fraser4 that a postal revocation does not take effect on posting but must be “brought to the mind” of the offeree. This means that the time when it would be reasonable to expect the offeree to acquire notice of it. Even if the post office was not delayed in delivering the letter to Donald, the letter would not have reached Donalds with a reasonable time to acquire notice of it. The letter would have reached Donalds on the day he was expected to give his acceptance by and would not give Donalds a reasonable time to receive the letter. Therefore, the letter of revocation was invalid and the contract made by Mac and Donalds stays valid.
B. Establishing Valid Acceptance
5 Furthermore, it cannot be argued that the offer was terminated due to a lapse of time. The offer may lapse on the expiry of the period for which the offer, which was 5.00 PM on 4 August. Although the acceptance was received by Mac at 9.00 AM on 5 August, the acceptance letter arrived almost instantaneously at 4.59 PM on 4 August. Using the Receipt rule in a one-way instantaneous communication, the acceptance will take place when a reasonable offeror would access the message, taking account of all the given circumstances. In Tenax SS CO Ltd v The Brimnes5, it was held that if revocation was communicated to the place of business during ordinary business hours, then the revocation was effective when it was received even if it remains unread. The case illustrates that time of receipt of the acceptance letter should count when it was reasonable for one to receive it. It would be reasonable to assume that at 4.59 PM, Mac or Blur would be in the office since office hours are from 9.00 AM to 5.00 PM and sometimes even later in Singapore. Even if Blur, in the position of a secretary, was not obliged to stay longer than 5.00 PM (assuming that he ends his work day at 5.00 PM), he is obligated to perform his secretarial duties until 5.00 PM, instead of leaving the office in a rush. Donalds could not reasonably foresee this, and it was also beyond his scope of control. Thus, there was a valid acceptance and a valid contract formed on 4 August.
II. On Damages Payable
6 There are two possible scenarios that can be argued in this scenario. The first scenario being that Mac would be able to sue for $5000 in the event that he can prove that there was only one contract in existence, which would be further elaborated in Section A. Donalds can argue that he was only bound to pay $3000 in Scenario 2, elaborated in Section B.
A. Scenario I
(1) Establishing Insufficient Consideration
7 Mac can argue that there was no further contract formed following the one made on 4 August. He has to prove that there was insufficient consideration when he agreed to accept $3000 in exchange for his burger frying equipment. In this scenario, there is an existing contractual duty owed to Donalds, which in this case is the purchase of equipment, a partial payment of a debt could not extinguish the obligation to pay the whole. This is seen in the case of Foakes v Beer6 where a promise to accept part performance is unenforceable because there is no consideration as a lesser sum is not satisfaction for a debt. In this case, Mac does not receive any benefit in getting a lesser payment when he already has a contractually enforceable promise for the whole performance.
8 While it can be also argued that there a partial payment amounts to a practical benefit to Mac—which was some money to pay off creditors—and thus can be accepted as good consideration, it would be contradictory to precedent cases. In re Selectmove Ltd7, the court, though acknowledging the force of such argument, held that the principle in Williams v Roffey8 could not be extended to situations involving partial payment of debt as that would in effect be overruling the House of Lords’ decision in Foakes v Beer9. According to the principle of stare decisis, the British Court of Appeal had no power to overrule the decision made by the House of Lords. In other words, part payment of debts cannot be accepted as practical benefit, and thus as good consideration, as that would contradict the doctrine of precedent. Therefore, Donalds cannot argue that he was bound to pay $3000 for the equipment.
(2) Promissory Estoppel as an Invalid Defence
9 Donalds could argue that the court apply promissory estoppel to override Foakes v Beer10, as evidenced in Collier v P & M J Wright (Holdings) Ltd11. In the event that the second contract was not made between Mac and Donalds, it can still be argued that the promise made to Mac would still be grounds for legal action. The conditions for promissory estopped defined in Collier v P & M J Wright (Holdings) Ltd12 are:
When 1 the debtor offers to pay part only of the amount he owes, 2 the creditor voluntarily accepts that offer and 3 in reliance on the creditor’s acceptance the debtor pays the part of the amount he owes in full, the creditor will by virtue of the doctrine of promissory estoppel, be bound to accept the part payment as full and final satisfaction of the whole debt. For him to resile will be inequitable to the debtor.
10 However, the facts of the case differs from the facts of the scenario between Mac and Donalds. To establish reliance, there are two conditions as stated in The Post Chaser13: the Promisee has committed himself to a course of action he would not otherwise have adopted; and the Promisee would be prejudiced if the Promisor were to resile from the promise. In Collier v P & M J Wright (Holdings) Ltd14, the plaintiff had paid for his share of the debt and was prejudiced because the defendant had resiled from the promise. Whereas in this scenario, Donalds does not lose his original position as he retracted his payment and refused to accept delivery of the equipment. In Lam Chi Kin David v Deutsche Bank AG15, the Court of Appeal noted that the focus of the existence of detriment can establish whether it will be inequitable to allow the promisor to go back on his promise. As there was no detriment suffered by Donalds and thus no reliance, he cannot argue for promissory estoppel.
11 Given that the contract between Mac and Donalds is valid and legally binding, Mac can file an action suit against Donalds for breach of contract. Donalds’ refusal to pay Mac the full $5000 is an actual breach of the contract by repudiation as he refuses to perform what is due by refusing to pay for the equipment. When Mac elected to discharge the contract by “accepting” the breach, he is able to claim damages.
B. Scenario II
(1) Termination of First Contract
12 It can be argued that the existing contract was terminated on 7 August as there was a “mutual release”16 of the previous contract binding Donalds’ to the $5000 owed to Mac. When Mac agreed to a payment of $3000 inclusive of delivery, Donalds can argue that the first contract was terminated and a second contract to purchase the equipment for $3000 was formed instead.
(2) Establishing a Valid Second Contract
13 For this second contract to be made valid, Donalds must prove that there was a valid offer, acceptance and sufficient consideration for Mac to sell his equipment at $3000. As the parties were communicating their offer and acceptance through a telephone, the two-way instantaneous receipt rule can be used to establish that there was a valid offer and acceptance.
14 To establish consideration, Lush J in Currie v Misa17 states:
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.”
15 In this scenario, Mac suffers a larger loss because he is selling the equipment to Donalds for thirty percent of the market value but stands to gain some money to return his creditors. Donalds, on the otherhand, suffers a loss in resources when he pays for the equipment despite having financial issues. It was held in Chappel & Co v Nestlé18, that a promise is enforceable as long as something valuable in the eye of the law has been given for it. In this scenario, the benefit Mac gains from the contract would be valuable as it would help him to pay off his creditors and keep him out of debt. Based on the benefit-detriment analysis in Currie v Misa19, this can be sufficient consideration for Donalds and Mac to create a new contract.
16 If Donalds is able to argue that the first contract has been terminated and a second contract has been formed in its stead, Donalds may be able to claim that he was bound to pay $3000 for the burger frying equipment.
17 There is legal basis for Mac to sue Donalds as there was a contract between the two parties that was made on 4 August. On the issue of damages payable, Mac would have to argue that the contract made on 4 August was valid and was not his subsequent agreement to accept $3000 for the equipment cannot be counted as a valid contract as there was no consideration. However, Donalds can argue that there was in fact a termination of the first contract and a second contract formed in its place, thus binding him to pay $3000 for a breach of contract. Given the facts of the case, it is unlikely that Mac would be able to claim for $5000 as he did agree to a payment of $3000. Thus, Mac would only be able to sue for a breach of a second contract and thus claim $3000.
1 Dickinson v Dodds 1876 2 Ch D 463
2 Byrne & Co v Leon Van Tien Hoven & Co 1880 5 CPD 344
3 The Household Fire and Carriage Accident Insurance Company (Limited) v Grant 1879 LR 4 Ex D 216
4 Henthorn v Fraser 1892 2 Ch 27
5 Tenax Steamship Co v Owners of the Motor Vessel Brimnes 1974 EWCA Civ 15
6 Foakes v Beer 1884 UKHL 1
7 re Selectmove Ltd 1993 EWCA Civ 8
8 Williams v Roffey Bros & Nicholls (Contractors) Ltd 1989 EWCA Civ 5
9 Supra n 6
11 Collier v P & MJ Wright (Holdings) Ltd 2007 EWCA Civ 1329
13 The Post Chaser 1982 1 All ER 19
14 Supra n 11
15 Lam Chi Kin David v Deutsche Bank AG 2010 SGCA 42
16 Shenoy, George T. L. and Loo, Wee Ling. Principles of Singapore Business Law. (2009). at pg. 484, para 16.19
17 Currie v Misa 1875 LR 10 Ex 153 at 162
18 Chappell & Co Ltd v Nestlé Co Ltd 1959 UKHL 1
19 Supra n 17